Celsius Responds to KeyFi Lawsuit With One of its Own

Earlier this summer, KeyFi – a staking software firm and former partner of the platform – sued Celsius for mismanagement of customer deposits, fraud, and failure to honor an agreement between the two parties. To date, this case has not yet been resolved by the court.

However, in an interesting turn of events, the crypto lender has responded with a lawsuit of its own, accusing KeyFi of using Celsius funds for unauthorized business dealings, outright theft, and “gross incompetence.”

Alleged Gross Mismanagement

The return lawsuit also claims the business relationship between the two former parties began in 2020 when Jason Stone – the CEO of KeyFi – allegedly represented himself as a pioneer in coin staking and DeFi, in a bid to gain access to Celsius funds. However, things went south pretty quickly, according to the crypto lender.

“Unfortunately, Defendants Stone and KeyFi, Stone’s majority-owned corporate vehicle, proved themselves incapable of deploying coins profitably, and appear to have lost thousands of Celsius coins through their gross mismanagement. But the Defendants were not just incompetent, they also were thieves.”

Accusations of Outright Theft

According to Celsius, millions of dollars worth of company assets were misappropriated by KeyFi and processed through Tornado Cash in order to obfuscate future dealings with those funds.

When asked about the usage of Celsius funds, KeyFi purportedly refused to accurately report on their business dealings, opening up the firm to unforeseen liabilities. Furthermore, the document indicates that KeyFi appears to have promised Celsius the return of all funds – plus the latter’s share of the profits – amicably, a promise that did not come to fruition.

The risky investments hinted at include but are not limited to NFTs, which KeyFi was forbidden to acquire using Celsius assets.

Unauthorized NFT Purchases

In the lawsuit filed by Celsius and Celsius KeyFi LLC – a subsidiary created due to the collaboration between the two former partners – a key complaint is the use of Celsius funds that were to be deployed in DeFi and staking ventures. These assets were meant to purchase hundreds of NFTs, belonging to collections such as CryptoPunks and Bullrun Babes, among others.

The document suggests that the purchases were sanctioned by KeyFi leadership in spite of an agreement between the parties that forbade the use of Celsius assets to acquire NFTs. Furthermore, a number of these NFTs were later sold, allegedly netting Celsius “seven-figure returns, (which they pocketed).”

Although this lawsuit could be nothing more than a wild bid to secure funds that would help Celsius to recover from bankruptcy, it’s up to the courts to decide if there is any truth to the accusations or if it’s just a response to the previous one.